Phases/Stages in a contract of sale

1. Limketkai Sons vs. CA, 250 SCRA 523

Facts: Respondent BPI engaged the services of a real estate broker Mr. Pedro Revilla, Jr. granting the latter authority to
dispose or contract a sale for the formers property with Philippine Remnants Co. Inc. as a grantor. Pedro Padilla Jr. sent a
letter to the respondent that the former had found a prospective buyer herein Petitioner. Petitioner showed interest to
purchase the property of the respondent by writing them a proposal letter. The proposal was rejected by the
respondent for it did not conform to their terms. Further negotiations through a letter were contracted by the petitioner
but still respondent did not agree with the former. Thereafter petitioner filed a case alleging that the contract of sale
was already perfected but the court ruled in favor of the respondents. Hence, this motion of appeal for specific
performance.

Issue: Whether or not a contract of sale of the subject parcel of land existed between the petitioner and respondent?

Ruling: The court ruled that the contention of the petitioner is untenable. The exhibits presented did not in any way
reveal a perfection of a contract of sale between the parties. Article 1475 of the New Civil Code specifically provides
when a contract of sale is perfected.

“ART. 1475. The contract of sale is perfected at the moment there is meeting of minds upon the thing which is the object
of the contract and upon the price.

Petitioner’s exhibits did not establish any definitive agreement or meeting of the minds between the concerned parties
as regards the price or term of payment. Instead, what merely appears therefrom is respondent BPI’s repeated rejection
of the petitioner’s proposal to buy the property at P1,000/ sq.m.

Also, Art. 1319 did not show in the exhibits presented. The article provides that for a contract of sale to be valid, the
offer must be certain and acceptance absolute.

Further, there can be no valid contract because it was not in accordance with the provisions of the statute of frauds.

Paragraph 2 (e) of Art. 1403 of the statute of frauds provides that for a contract of lease for a period more than one
year, or for the sale of real property or of an interest therein to be valid, it should be ratified and in a written document.
 2. Jovan Land vs CA, 267 SCRA 160

Facts: Petitioner is a corporation engaged in the real estate business and made an offer to private respondent Quesada
Inc. of P10.25 million for a property in Sta. Cruz, Manila. This offer was not accepted by Quesada and so it sent a second
written offer for the same price but inclusive of an undertaking to pay the documentary stamp tax, transfer tax,
registration fees and notarial charges. A check for P1 million as earnest money was included. This second offer was also
rejected by private respondent.

A third written offer of P12 million was sent with a check for P1 million as earnest money. The document was annotated
with the phrase “received original, 9-4-89” with the signature of Conrado Quesada next to it.

On the basis of the annotation, petitioner argues that the offer was accepted and thereby a contract of sale for the
property was perfected, filing an action for specific performance to turn over the property.

The lower court said that the annotation did not signify acceptance of the offer; therefore, the contract was not
perfected. Hence, this petition.

Issue: Was the contract of sale perfected?

Ruling: No. The annotation merely served as memorandum that the document was received by respondent. It did not
signify a meeting of the mind—and so, consent, an elemental requisite for a contract of sale, was not established. The SC
said: “Although there was a series of communications through letter-offers and rejections as evident from the facts of
this case, still it is undeniable that no written agreement was reached between petitioner and private respondent with
regard to the sale of the realty. Hence, the alleged transaction is unenforceable as the requirements under the Statute
of Frauds have not been complied with. Under the said provision, an agreement for the sale of real property or of an
interest therein, to be enforceable, must be in writing and subscribed by the party charged or by an agent thereof.” At
this point, the negotiation phase was not yet completed.
Absolute and Conditional Sales

3. Peoples Industrial vs CA, 281 SCRA 206

FACTS: Petitioner entered into 6 contracts to sell with private respondent, Mar-ick Investment Corporation, who owns a
subdivision. The contracts to sell have as their object 6 subdivision lots for a total price of P44,396 (P7,333.20 for 5 lots
and P7,730 for 1 lot). Price was payable with a down-payment of P2,906 and the balance payable for 120 equal monthly
instalments.

All of the agreements provided (Provision No. 9) that if the Purchaser fails to pay any of the monthly instalments, the
contracts are deemed to have expired and become null and void without need of notice to Purchaser or of any judicial
declaration. Any sums already paid to the subdivision corporation under the contracts are deemed rentals.

After 10 years, the petitioner was still unable to pay any of the monthly instalments. As such, private respondent
notified petitioner that the previous contracts were cancelled and asked the latter to remove any encroachments in the
subdivision’s property.

After a series of negotiations, both parties entered into a new contract to sell involving 7 lots and which also included a
statement saying that their previous contracts have already been cancelled. The new contract was dated October 11,
1983 but neither of the parties signed the same. Consequently, petitioner signed checks in favour of private respondent.

Private respondent received the checks but did not encash the same. Instead, it filed a complaint for accion publiciana
de posesion against petitioner praying for the removal of petitioner and the payment of rental fees, demolition of
encroachments and other claims.

ISSUE: Whether or not Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is
applicable to the first 6 contracts entered into between the parties.

RULING: Article 1592 of the Civil Code does NOT apply. The subject contracts were contracts to sell and not contracts of
sale. Article 1592 provides that:

“In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the
time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration
of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new term.”

The distinctions between a contract to sell and contract of sale are the following:

* Title: In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to
sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price.

* Recovery of ownership: In a contract of sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective.

Note that a contract to sell is a conditional contract of sale which contains a positive suspensive condition that requires
full payment by the buyer before title over the thing is transferred. Failure to comply with this condition, renders the
contract ineffective. Meanwhile, a deed of sale is considered

absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller
until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period.
 4. Dignos vs CA, 158 SCRA 375

Facts: Dignos owned a lot which was sold to Jabil on June 1965 payable in two installment with an assumption of
indebtedness with First Insular Bank in the sum of 12000 which was paid to Dignos and the next installment to be paid
on September of the same year. On November 1965, Dignos sold the same property to Cabigas. A deed of sale was
executed and registered with the Register of Deed. As Dignos refused the payment of second installment from Jabil and
after the knowledge by the latter of the sale to Cabigas, Jabil filed the instant case. CFI Cebu rendered a decision voiding
the sale of Dignos to Cabigas and awarding the sale to Jabil. CA affirmed the decision.

Issue: What are the elements of the contract of sale? Whether the sale is null and void?

Held: The elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition,
Article 1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the vendee upon
actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA
276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the
vendee upon actual or constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject Deed of
Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the trial court, the
Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965 so that the latter
constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach Resort
on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses
(Decision, Civil Case No. 23-L; Record on Appeal, p. 108).

Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners,
contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a
contract to sell.

Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners
of the same and the sale is null and void.
 5. Galang vs CA, 225 SCRA 37

FACTS: The Buenaventuras sold to the Galangs the property they inherited from their parents. The agreement was
embodied in the Deed of Sale. The agreement as to payment were as follows: 25% of the purchase price is to be paid
upon the signing, 25% within 3 months or upon the removal of encargado from the premises, with the delivery of the
owner’s duplicate certificate, 50% is within 1 year upon which the title will be transferred. The Galangs paid the first 25%
of the price. Thereafter they demanded the removal of the encargado and the delivery of the duplicate title. The
Buenaventuras failed to do so despite the willingness of the Galangs to pay the other 25%. Thereafter the Galangs filed
the instant action for specific performance.

ISSUE: Was the removal of the "encargado" a condition precedent to the fulfillment of the contract of sale such that
finding that it was a legally impossible condition would entitle the buyers to the rescission of the contract?

RULING: It is clear that the parties had reached the stage of perfection of the contract of sale. There being already "a
meeting of the minds upon the thing which is the object of the contract and upon the price," and on the basis of which
both parties had the personal right to reciprocally demand from the other the fulfillment of their respective obligations.
But contracts of sale may either be absolute or conditional. What we have here is a contract to sell for it is the transfer
of ownership, not the perfection of the contract that was subjected to a condition. Ownership was not to vest in the
buyers until full payment of the purchase price and the transfer of the title to the buyers. Apart from full payment of the
purchase price, we find no other condition which would affect the obligations of the parties, i.e., to pay, on the part of
the buyer and to convey ownership, on the part of the seller.

There was no basis for rescinding the contract because the removal of the encargado was not a condition precedent to
the contract of sale. Rather, it was one of the alternative periods for the payment of the second installment given by the
seller himself to the buyers. Secondly, even granting that it was indeed a condition precedent rendering necessary the
determination of the legal status of the encargado, the lower courts were rash in holding that the encargado was a
tenant of the land in question.
 6. Lim vs CA, 263 SCRA 569

Facts: Private Respondent Liberty Luna sold her land to Petitioners Vicente and Micheal Lim on Sept 2, 1988. One of the
stipulations of the contract of sale was that petitioners will deposit an earnest money worth 200,000.00 pesos and
respondent will take responsibility to eject the squatters, within a given period, on her land before delivering the
property to the petitioners. The respondent to do so, but the petitioners did not ask for a refund of the earnest money.
A second meeting was arranged between the parties, whereby they agreed to increase the price of the land and still
required the respondent to eject the squatters. A few days after, respondent returned the earnest money claiming that
she could not eject the squatters – a condition stipulated in the contract – and in failing to do so, the contract of sale
ceased to exist and she no longer had the obligation to sell and deliver the property to the petitioners. The petitioners
refused to accept the money, after which the respondent filed a complaint for consignation before the court against the
petitioners. The trial court ruled in favor of the petitioners and ordered the parties to proceed with the sale. On appeal,
the CA reversed the ruling and rendered a decision favoring the respondent. Hence this petition.

Issue: Did the petitioners lose the right to demand that the land be sold to them as a result of the respondent’s failure to
eject the squatters from the land?

Ruling: No. The Court ruled that there is already a perfected contract as evidenced by the earnest money received (Art.
1482, Civil Code) and from the moment the contract was perfected, the parties can reciprocally demand performance of
obligation from one another. The contention of the respondent the failure to fulfill the condition of ejecting the
squatters, her obligation to proceed with the sale is extinguished is untenable. Respondent failed to distinguish between
a condition imposed on the perfection of the contract and a condition imposed on the performance of an obligation.
Failure to comply with the first condition results in the failure of a contract, while failure to comply with the second
condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. The
condition to remove the squatters is clearly a condition imposed on the performance of an obligation and not for the
perfection of a contract. Her attempt to rescind the contract is not justifiable as she is not the injured party. In the case
at bar, even if the respondent failed to perform her obligation, the petitioners still chose to proceed with the sale and
respondent has no right to refuse. The right to rescind as provided in Article 1545 belongs to the injured party, in this
case, the petitioners, and not to the respondent. Hence the right to demand that the be sold still remains.
 7. Babasa vs CA, 290 SCRA 532

Facts: The spouses Vivencio and Elena Babasa (vendor) entered into a contract of “conditional sale of registered lands”
with Tabangao Realty (vendee) over 3 parcels of land in Batangas City for P2M, P300K as down payment. It was agreed
that the balance of the purchase price shall be paid by Tabangao upon presentation by the Babasas of transfer
certificates of titles in their name in favor of Tabangao within twenty (20) months from the signing of the contract.
Consequently, Tabangao leased the parcels of land to Shell. Shell immediately started the construction thereon of a
Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone making
Tabangao its real estate arm. Two days prior to the expiration of the 20-month period, specifically on 31 December
1982, the Babasas asked Tabangao for an indefinite extension within which to deliver clean titles over the lots because
Tabangao did not want to pay the monthly interests. In response the Babasas executed a notarized unilateral rescission
to which Tabangao responded by reminding the Babasas that they did not comply with their contractual obligation to
deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their contract. The Basabas
insisted on the unilateral rescission and demanded the SHELL vacate the lots.

Issue: Whether or not the contract was a lease contract?

Ruling: The contract is laden with terms and stipulations clearly indicative of a contract of sale. The parties desire and
mutually “agreed on the sale and purchase of the three parcels of land”. There was a “vendors” and a “vendee”, not
lessor and lessee. In fact, Tabangao was granted absolute and unconditional right to take immediate possession of the
premises. Even if there was no word “ownership” mentioned in the contract, it does not mean that the contract was one
of lease. It is too late for petitioners to insist that the contract is not what they intended it to be.

Even if it was titled as a contract of conditional sale, it is one of absolute sale. There is absolutely no proviso reserving
title to the Babasas until full payment of the purchase price, nor any stipulation giving them the right to unilaterally
rescind the contract in case of non-payment. A deed of sale is absolute in nature although denominated a “conditional
sale” absent such stipulations. In such cases, ownership of the thing sold passes to the vendee upon the constructive or
actual delivery thereof. Constructive delivery was accomplished upon the execution of the contract without any
reservation to the Babasas. Actual delivery was made when Tabangao took unconditional possession of the lots and
leased them to Shell.
 8. Romero vs CA, 250 SCRA 223

FACTS: On June 9, 1988, a contract denominated "Deed of Conditional Sale" was executed between petitioner (Mr
Romero) and respondent (Ms Ongsiong) stating that petitioner shall advance P50,000.00 which would be used in an
ejectment case against the squatters and if after 60 days from the date of the signing of the contract the vendor
(respondent) shall not be able to remove the squatters, the downpayment shall be reimbursed by the vendor to the
vendee (petitioner). On February 21, 1989, judgment was rendered ordering the squatters to vacate the premises. The
decision was handed down beyond the 60-day period stipulated in the contract.

Respondent sought to return the P50,000.00 she received from petitioner since she could not get rid of the squatters.
Petitioner refused the tender and proposed that he shall take it upon himself to eject the squatters, provided, that
expenses shall be chargeable to the purchase price.

Respondent insisted that the Deed of Conditional Sale had been rendered null and void by her failure to evict the
squatters within the agreed 60-day period. He added that he decided to retain the property.

ISSUE: Whether or not there is a perfected contract of sale?

RULING: Yes. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to
transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. A deed of sale,
although denominated as a deed of conditional sale, may be treated as absolute in nature, if title to the property sold is
not reserved in the vendor or if the vendor is not granted the right to unilaterally rescind the contract predicated 
on
the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. Under the agreement, respondent is
obligated to evict the squatters. The ejectment of the squatters is a condition the operative act of which sets into
motion the period of compliance by petitioner of his own obligation, to pay the balance of the purchase price.
Respondent's failure to remove the squatters from within the stipulated period gives petitioner the right to either refuse
to proceed with the agreement or waive that condition (Art. 1545 NCC). This option clearly belongs to petitioner and not
to private respondent. Here, petitioner has waived the performance of the condition imposed on respondent to free the
property from squatters.
Elements of a Contract of Sale

9. Co vs. CA, 312 SCRA 528

Facts: Sometime on October 9, 1984, Respondent Adoracion Custodio entered into a verbal contract with Petitioner
Spouses Co (SPS. Henry Co and Elizabeth Co and Melody Co) for her purchase of the latter’s house and lot for in the
consideration of the sum of $ 100,000.00. The purchase price of $100,000.00 is payable in two payments, $ 40,000.00
on December 4, 1984 and the balance of $60,000.00 on January 5, 1985. Upon leaving for USA, Custodio paid $ 1,000.00
and P 40,000.00 to the petitioners as earnest money. On January 25, 1985, although the period of payment had already
expired, respondent paid to the Cos the sum of $ 30,000.00 as partial payment. On March 15, 1985, petitioners,
demanded from respondent the payment of the balance of purchase price. Not receiving any response thereto,
petitioners informed respondent that she has lost her ‘option to purchase’ and that her other rights to the property
including payments made are deemed forfeited. On Sept. 5, 1986 Respondent informed the petitioners that she is now
ready to pay the remaining balance to complete the selling price as agreed upon but she was ignored. On October 24,
1986, respondent Custodio filed a complaint in the RTC which ruled in favour of her. The decision was affirmed by the
Court of Appeals. Hence, this petition for review on certiorari.

Issue: Whether or not there is a meeting of minds of both parties to perfect the contract of sale

Ruling: A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price. The elements of a valid contract of sale under Article
1458 of the Civil Code are 1) consent or meeting of the minds 2) determinate subject matter and 3) price certain in
money or its equivalent. As evidenced by the March 15, 1985 letter, all three elements of a contract of sale are present
in the transaction between Custodio and the Cos. Custodio’s offer to purchase the house and lot, subject of the sale at a
price $ 100,000.00 was accepted by the Cos. Even the manner of payment of the price was set forth in the letter. The
earnest money was already received by the petitioners. Under Article 1482 of the Civil Code, earnest money given in a
sale transaction is considered part of the purchase price and proof of the perfection of sale. Moreover, the Court cannot
uphold the forfeiture clause contained in the petitioners’ letter. It appears that such condition was unilaterally imposed
by the Cos and was not agreed to by Custodio. It cannot therefore be considered as part of the contract of sale as it lacks
the consent of Custodio. Petition is denied.
 10. Raet vs CA, 295 SCRA 677

Facts: In 1984, the petitioners, the spouses Raet and the spouses Mitra, negotiated with Amparo Gatus concerning the
possibility of buying the rights of the latter to certain units at a subdivision developed by private respondent Phil-Ville
Development and Housing Corporation (PVDHC) primarily for parties qualified to obtain loans from the Government
Service Insurance System (GSIS). The spouses Raet and the spouses Mitra paid Gatus P40,000 and P35,000, respectively,
and Gatus, as an agent of PVDHC, issued receipts in her own name.

The spouses Raet and spouses Mitra looked for GSIS members who could act as accommodation parties by allowing
them to use their policies so that they can purchase the units in said subdivision. The spouses Raet presented the GSIS
policy of Ernesto Casidsid while the spouses Mitra that of Edna Lim.

The spouses Raet paid P32,653.00, while the spouses Mitra paid P27,000.00, to private respondent PVDHC, on the
understanding that these amounts would be credited to the purchase prices of the units which will be determined after
the approval of their loan applications with the GSIS. Meanwhile, the spouses Raet were allowed to occupy the unit built
on Lot 4, Block 67, Phase 4A of the Las Villas de Sto. Niño Subdivision, while the spouses Mitra were given the unit on Lot
7, Block 61, Phase 4A thereof.

But the GSIS disapproved the loan applications of petitioners. Petitioners were advised by private respondent PVDHC to
seek other sources of financing but they were allowed to remain in the subject premises.

Petitioners failed to pay. PVDHC, in separate demand letters, asked them to vacate the units they were occupying.
Petitioners refused. PVDHC filed ejectment cases against them in the MTC which ordered them on May 24, 1991 to
surrender the units. This decision was affirmed by the RTC and CA.

Petitioners Raet filed complaints against PVDHC with the RTC for the recovery of the supplemental costs they had paid
but it was dismissed for lack of jurisdiction. The petitioners then filed a complaint for specific performance and damages
against Gatus and PVDHC with the Housing and Land Use Regulatory Board (HLURB) which has exclusive competence to
handle cases involving disputes between subdivision buyers and developers. THE HLURB Arbiter decided in petitioners’
favor. But the HLURB Board of Commissioners reversed the decision.

Petitioners elevated the case to the Office of the President but the latter sustained the decision of the Housing and Land
Use Arbiter. Respondent elevated the case to the CA which set aside the decision of the Office of the President and
dismissed petitioners’ action without prejudice to their right to proceed against Gatus. Thus, this petition for review on
certiorari by the petitioners.

Issue: Whether or not respondent court committed a reversible error in concluding that there were no perfected
contracts of purchase and sale between petitioners and private respondent PVDHC with respect to the subject lots and
houses.

Ruling: Yes. The Court agreed with the conclusion of the CA that the parties in this case had not reached any agreement
with regard to the sale of the units in question. The reasoning of the Court are the following:

* The parties’ transactions lacked the requisites essential for the perfection of contracts. The records do not show the
total costs of the units and the payment schemes therefor.

The HLU Arbiter gave credence to the allegations of petitioners that there were agreements between them and PVDHC
as to the prices of the units. But, as pointed out by PVDHC, the figures referred to by petitioners were mere estimates
given to them by Amparo Gatus.

* Gatus was not the agent of respondent PVDHC.

The criminal case for estafa against Gatus was dismissed because it was found that she never represented herself to be
an agent of private respondent PVDHC. Also, Art. 1874, CC, requires for the validity of a sale involving land that the
agent should have an authorization in writing, which Gatus never possess.

* Since PVDHC had no knowledge of figures Gatus gave to petitioners as estimates of the costs of the units, it could not
have ratified the same at the time the latter applied for the purchase of the units. PVDHC was to enter into agreements
concerning the units with petitioners only upon the approval of the latter’s loan application with GSIS, which failed.

* There are no written contracts to evidence the alleged sales.

As correctly pointed out by CA:

To our mind, the determinative issue in this case is whether or not petitioners and private respondents have a perfected
and enforceable contract of sale or at least an agreement to sell over the disputed housing units. For, without a
perfected contract as an independent source of obligation, the binding prestation to do or give and the corollary right to
exact compliance do not arise. There can be no specific performance of a contractual obligation as yet non-existent.

Without dispute, no written deed of conveyance has been executed by PHIL-VILLE in favor of private respondents
involving the units in question.

As this Court sees it, there was no contract of sale perfected between the private parties over the said property, there
being no meeting of the minds as to terms, especially on the price thereof. At best, only a proposed contract to sell
obtained which did not even ripen into a perfected contract due at the first instance to private respondents’ inability to
secure approval of their GSIS housing loans. As it were, petitioners and private respondents have not hurdled the
negotiation phase of a contract, which is the period from the time the prospective contracting parties indicate interest
on the contract to the time the contract comes into existence - the perfection stage - upon the concurrence of the
essential elements thereof.
 11. Guiang vs CA, 290 SCRA 327

Facts: While Guilda Corpuz was in Manila seeking employment, her husband sold to the petitioners-spouses Antonio and
Luzviminda Guiang one half of their conjugal property, consisting of their house and the lot on which it stood. This was
done by her husband over her objection and absent her consent. Upon her return to Cotabato, Guilda gathered her
children and went back to the subject property.

Spouses Guiang, petitioners herein, filed a complaint for trespassing. Later, there was an amicable settlement between
the parties. Feeling that she had the shorter end of the bargain, Guilda filed an Amended Complaint against her husband
and petitioners. The said Complaint sought the declaration of a certain deed of sale, which involved the conjugal
property of Guilda and her husband, as null and void.

The lower court ruled in Guilda’s favor, hence this appeal by the Guiang spouses.

Issue: Whether or not, the sale of a conjugal property, absent consent of one of the spouses, is void?

Ruling: As stated in Article 124 of the Family Code, “…in the event that one spouse is incapacitated or otherwise unable
to participate in the administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance which must have the authority
of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other
spouse or authorization by the court before the offer is withdrawn by either or both offerors.”

In this case, the wife’s consent to the contract of sale of their conjugal property was totally inexistent or absent. The
nullity of the contract of sale is premised on the absence of Guilda’s (wife) consent. To constitute a valid contract, the
Civil Code requires the concurrence of the following elements: (1) cause, (2) object, and (3) consent. The last element is
indubitably absent in the case at bar. Hence, the sale is void.

Petitioner-spouses aver that the amicable settlement is a continuing offer that was accepted and perfected by the
parties as contemplated by the last sentence of Article 124. However, the court was not convinced. The order of the
pertinent events is clear: after the sale, petitioners filed a complaint for trespassing against private respondent, after
which the barangay authorities secured an “amicable settlement” and petitioners filed before the MTC a motion for its
execution. The settlement, however, does not mention a continuing offer to sell the property or an acceptance of such a
continuing offer. Its tenor was to the effect that private respondent would vacate the property. By no stretch of the
imagination, can the Court interpret this document as the acceptance mentioned in Article 124.
 12. Veterans Federation vs CA, 345 SCRA 348

FACTS: The object of the instant controversy is a parcel of land situated near the public market of San Pablo City, with an
approximate area of 1,092 square meters.

The said document was registered on June 18, 1964 at the Office of the Register of Deeds of San Pablo City.
Consequently, T.C.T. No. T-4414 was issued in favor of the VFP. However, the technical description that was inscribed in
the certificate of title was different from what was stated in the deed of sale. Instead, the Register of Deeds copied the
technical description appearing in an accompanying document submitted by the PNR.

VFP proceeded to clear and fence the property, following the boundaries as stated in the certificate of title, not realizing
that the incorrect technical descriptions appearing in the deed of sale.

After 18 years, the VFP decided to erect a building on the subject property to serve as its headquarters. This plan did not
materialize when upon inspection of the subject property, it was discovered that the fence had long been dismantled
and that there were now several permanent structures standing thereon. The VFP then learned that the residents had
been leasing portions of the subject property from the PNR unknown to VFP; and residents refused to vacate the
premises.

ISSUE: Whether or not the absolute deed of sale of the parcel of land is valid and enforceable.

HELD: The absolute deed of sale between VFP and PNR remains valid and enforceable

Ownership over the property specifically described in that contract (Exhibit "A") was conveyed to plaintiff-appellant by
defendant-appellant PNR by mutual consent after the former had paid the consideration. The allegation by defendant-
appellant PNR that the contract of sale is void because of plaintiff-appellant’s failure to construct its headquarters and a
bank in the property, a condition of the sale, is without merit. A perusal of the contract, Exhibit "A", would reveal it does
not contain any stipulation regarding the alleged condition. Nor is there any evidence adduced to support said
allegation. Allegation is not synonymous to proof. A party has the burden of proof to establish its defense by convincing
evidence. In short, the sale was not a conditional sale.

Respondent PNR cannot shirk from its obligation to convey title and surrender possession of the property which VFP
bought on the lame excuse that it is now too late in the day for VFP to seek such redress. There is no question that had it
not been for PNR’s gross mistake in supplying the wrong technical description to the Register of Deeds, there would
have been no erroneous inscription. Justice dictates that the courts must right this wrong without further delay. It is but
fair that petitioner VFP finally obtain the correct and legal title to the property it bought thirty-seven (37) years ago.
 13. Doles vs Angeles, 492 SCRA 607

Facts: Ma. Aura Tina Angeles filed a complaint for specific performance with damages against Jocelyn Doles. She alleged
that Doles was indebted to her in the concept of a personal loan amounting to P405,430.00 representing the principal
amount and interest; that, by virtue of a Deed of Absolute Sale, Doles, as seller, cede to Angeles, as buyer, a parcel of
land as well as the improvements thereon; that this property was mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure Doles' loan in the sum P337,050.00 with that entity; that as a condition of the foregoing
sale, Angeles shall assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the
remainder of the 25 years; that the property was at that time being occupied by a tenant paying a monthly rent of
P3,000.00; that upon verification with the NHMFC, Angeles learned that Doles had incurred arrearages amounting to
P26,744.09, inclusive of penalties and interest; that upon informing Angeles of her arrears, Doles denied that she
incurred them and refused to pay the same; that despite repeated demand, Doles refused to cooperate with Angeles to
execute the necessary documents and other formalities required by the NHMFC to effect the transfer of the title over
the property; that Angeles collected rent over the property and refused to remit the proceeds to respondent; and that
respondent suffered damages as a result and was forced to litigate.

Issue: Whether or not the Deed of Absolute Sale is valid.

Ruling: In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between
their principals. Since the sale is predicated on that loan, then the sale is void for lack of consideration.
A further scrutiny of the record shows, however, that the sale might have been backed up by another consideration that
is separate and distinct from the debt: Angeles averred in her complaint and testified that the parties had agreed that as
a condition for the conveyance of the property Angeles shall assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC. An assumption of a mortgage debt may constitute a valid consideration for a sale.
14. David vs Tiongson, 313 SCRA 63—Cimeni
 15. Dorado vda. De Delfin vs Dellota, 534 SCRA 397

FACTS: The late Dionisia Dorado Delfin was the registered owner of Lot No. 1213 situated in Panitan, Capiz with an area
of 143,935 square meters.

On June 16, 1929, Dionisia executed an “Escritura De Venta Con Pacto de Retro” over a 50,000-square meter portion of
Lot No. 1213 in favor of spouses Ildefonso Dellota and Patricia Delfin. However, Dionisia failed to exercise her right of
redemption.

On June 9, 1949, Dionisia sold another portion of Lot No. 1213 consisting of 50,000 square meters to Gumersindo
Deleña, thus, leaving an unsold area of more than 43,000 square meters.

Dionisia never redeemed this 50,000-square meter portion from Gumersindo.

On October 12, 1956, Dionisia executed a “Deed of Mortgage and Promise To Sell” in favor of Salvador over a 90,000-
square meter portion of Lot No. 1213, without specifying whether it included the 50,000-square portion sold (with right
of redemption) to Gumersindo.

On June 8, 1964, Dionisia filed a complaint for recovery of possession and damages with an application for a writ of
preliminary mandatory injunction. Impleaded as defendant was respondent Salvador D. Dellota, represented by his wife
Genoveva D. Dellota and their children.

The trial court rendered its decision, ordering Dellota to allow the plaintiffs to redeem the 40,000-square meter portion
of subject Lot 1213, after plaintiffs shall have paid the defendant the amount of P2,000.00. The court also declared the
ownership over the 50,000-square meter portion of the subject lot to the heirs of Gumersindo Delena.

ISSUE: 1) Whether the consideration of P5,300.00 for a five-hectare portion of lot is “unusually inadequate.”

RULING: The Court held in De Ocampo and Custodio v. Lim, that in sales denominated as pacto de retro, the price
agreed upon should not generally be considered as the just value of the thing sold, absent other corroborative evidence.
This is because, on the part of the vendor, the right to repurchase the land makes it immaterial to him whether or not
the price of the sale is the just value thereof. As for the vendee, the price does not induce him to enter into the contract
as he does not acquire the thing irrevocably, but subject to repurchase at the stated period. Rather, the vendee pins his
hope on the expectancy that he will acquire the thing absolutely at a favorable price should the vendor fail to redeem
the thing sold.

Subsequently, in Buenaventura v. Court of Appeals, this Court ruled that there is no requirement in sales that the price
be equal to the exact value of the thing subject matter of the sale.

Following De Ocampo and Buenaventura, this Court finds no cogent reason to conclude that the 1949 price of P5,300.00
as agreed upon by the parties was unreasonable or unusually inadequate.
 16. Dizon vs CA, 302 SCRA 288

FACTS: Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with petitioners involving a
1,755.80 square meter parcel of land situated at Diliman, Quezon City. The term of the lease was for 1 year commencing
from May 16,1974 up to May 15, 1975. During this period, Overland Express Lines was granted an option to purchase for
the amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a monthly rental of
P3,000.00.

For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month effective June 1976, petitioners
filed an action for ejectment against it. Overland Express Lines were ordered to vacate the leased premises and to pay
the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable compensation for
the use and occupation of the premises during the period of illegal detainer from June 1976 to November 1982.

Overland Express Lines Inc. then endorsed P300,000.00 as partial payment for the leased property and as an attempt to
resurrect the lapsed option of purchasing the property, which petitioners accepted (through Alice A. Dizon,) with the
issuance of an official receipt.

Issues: 1. Whether Alice Dizon was authorized to receive the sum of P300,000.00 on behalf of petitioners and validly
consider it as the partial payment of the property to be purchased by the respondent(Overland Express Lines, Inc.).

2. Whether there was a perfected contract of sale between the parties.

Held: 1. Alice Dizon is not authorized to receive the sum of P300,000.00 on behalf of

petitioners, therefore will not validly bind the petitioners with the private respondents to a contract of sale.

Article 1874 of the Civil Code is explicit that: "When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void." There was no written proof and valid
consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as
petitioners’ alleged agent, and Overland Express Lines.

The sum of P300,000.00 received by Alice Dizon cannot be considered as partial payment for the purchase of the
property for the reason that the option given to the private respondent in purchasing the property as an added
condition in the contract of lease already expired on May 1975.

As provided in Art 1670 of the Civil Code, the provision entitling the lessee the option to purchase the leased premises is
not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. Private
respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for
one year.

2. There was no perfected contract of sale in the first place because Alice Dizon was not an authorized agent of
petitioner, therefore she cannot do any legal transactions with the respondent.

As enshrined in Art 1868, “By the contract of agency a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter.
 17. Leabres vs CA, 146 SCRA 158

Facts: Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left by the deceased is the
“Legarda Tambunting Subdivision” located on Rizal Avenue Extension, City of Manila. Shortly after the death of said
deceased, plaintiff Catalino Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the
Subdivision from surviving husband Vicente J. Legarda who acted as special administrator, the deed or receipt of said
sale appearing to be dated May 2, 1950. On August 28, 1950, the Probate Court of Manila appointed Vicente Legarda as
an administrator together with Pacifica Price and Augusto Tambunting over the testate estate of said Clara Tambunting
and authorized through its order of November 21, 1951 the sale of the property. Vicente L. Legarda was relieved as a
regular Administrator and the Philippine Trust Co. which took over as such administrator advertised the sale of the
subdivision which includes the lot subject matter herein in various issues of the Manila Times and Daily Mirror. No
adverse claim or interest over the subdivision or any portion thereof was ever presented by any person, and in the sale
that followed, the Manotok Realty, Inc. emerged the successful bidder. By order of the Probate Court, the Philippine
Trust Co. executed the Deed of Absolute Sale of the subdivision in favor of the Manotok Realty, Inc. which deed was
judicially approved on March 20, 1959, and recorded immediately in the proper Register of Deeds which issued the
corresponding Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein. A complaint dated
February 8, 1966, was filed by herein plaintiff, which seeks, among other things, for the quieting of title over the lot
subject matter herein, for continuing possession thereof, and for damages.Leabres anchors his claim on the receipt
dated May 2, 1950, which he claims as evidence of the sale of said lot in his favor. However, Catalino Leabres has not
registered his supposed interest over the lot in the records of the Register of Deeds, nor did he present his claim for
probate in the testate proceedings over the estate of the owner of said subdivision, in spite of the notices advertised in
the papers. Both the RTC and CA dismissed the petitioner’s claim.

Issue: Whether or not a receipt is a valid basis for a contract of sale.

Held: An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a promise to
sell. There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no agreement as
to the total purchase price of the land nor to the monthly installment to be paid by the petitioner. The requisites of a
valid Contract of Sale namely 1) consent or meeting of the minds of the parties; 2) determinate subject matter; 3) price
certain in money or its equivalent-are lacking in said receipt and therefore the “sale” is not valid nor enforceable.
Furthermore, it is a fact that Dona Clara Tambunting died on April 22, 1950. Her estate was thereafter under custodia
legis of the Probate Court which appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don
Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale
cannot bind the estate of Clara Tambunting. Petitioner should have submitted the receipt of alleged sale to the Probate
Court for its approval of the transactions. Anent his possession of the land, petitioner cannot be deemed a possessor in
good faith in view of the registration of the ownership of the land. To consider petitioner in good faith would be to put a
premium on his own gross negligence
 18. People’s Industrial vs CA (GR 11273, 24 Oct 1997)

Facts: Private respondents Mar-ick Investment Corporation is the registered owner of a subdivision in Cainta, Rizal. On
May 29, 1961, private respondents entered into six (6) agreements with petitioner People’s Industrial and Commercial
Corporation whereby it agreed to sell to petitioner six (6) subdivision lots, for the total amount of P44396.00.

Provision No. 9 of the agreements states that should the purchaser fail to make the payment of any of the
monthly instalments as agreed, the contract shall, expire by itself and become null and void without necessity of notice
to the purchaser or of any judicial declaration to the effect, and any and all sums of money paid under this contract shall
become rentals on the property.

After ten years, however, petitioner still had not fully paid for the six lots. Private respondent informed the
petitioner that the contracts are cancelled and demanded that the encroachments be removed therefrom.

After a series of negotiations, the parties agreed to enter into a new contract to sell which also stipulates that
the previous contracts have already been cancelled. The new contract is dated October 11, 1983 but neither of the
parties signed it. Thereafter, checks in the total amount of P37,642.72 are issued to private respondent. It received
them but did not encash those checks. Instead, it filed a complaint for accion publicianan de posesion against petitioner
praying that the latter be ordered to surrender the possession of the lots and pay the reasonable rentals, attorney’s
fees, moral and exemplary damages, and costs of the suit.

Issue: Whether or not there was a perfected and enforceable contract to sell on October 11, 1983 which modified the
earlier contracts to sell which had not been validly rescinded.

Ruling: There was no perfected and enforceable contract to sell on Oct. 11, 1983. Under the law, there is a binding
contract between the parties whose minds met on a certain matter notwithstanding that they did not affix their
signature to its written form.

In the case at the bar, it was private respondent’s company lawyer and sole witness, Atty. Manuel Villamayor, who
volunteered that after the cancellation of the 1961 agreements, the parties should negotiate and enter into “a new
agreement based on the current price” or at P400 per square meter. However, after he had drafted the contract and
sent it to the petitioner, the latter “deposited a check for down payment” but its representative refused to sign the
prepared contract. This draft contract may be deemed to embody the agreement of the parties. Private respondent did
not and has not denied the existence of that contract.

However, there are facts proving that, after all, the parties had not arrived at a definite agreement. By Atty. Villamayor’s
admission, the checks were not encashed because Tomas Siatianun (petitioner’s president) did not sign the draft
contract that he had prepared. On his part, Siatianun explained that he did not sign the contract because it covered
seven (7) lots while their agreement was only for six (6) lots.

It is on record, moreover, that the only agreement that the parties arrived at was the price indicated in the draft
contract. The number of lots to be sold is a material component of the contract to sell. Without an agreement on the
matter, the parties may not in any way be considered as having arrived at a contract under the law.
 19. Delpher Trades Corp vs IAC, 157 SCRA 349 (1988)

Facts: Delfin Pacheco and sister Pelagia were the owners of a parcel of land in Polo (now Valenzuela). On April 3, 1974,
they leased to Construction Components International Inc. the property and providing for a right of first refusal should it
decide to buy the said property whom the latter however assigned its rights and obligations under the contract of lease
in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of Delfin and Pelagia.

In 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades
Corporation whereby the Pachecos conveyed to the latter the leased property together with another parcel of land also
located in Malinta Estate, Valenzuela for 2,500 shares of stock of defendant corporation with a total value of P1.5M.

On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease
agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance of the lot which was
given by the courts due credit, thus petitioners question the decision of the Intermediate Appellate Court which
sustained that the action in question actually was a deed of sale which violated a right of first refusal under a lease
contract.

Issue: Whether or not the Deed of Exchange of the properties executed by the Pachecos and the Delpher Trades
Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the Hydro Phil’s right of first
refusal over the leased property included in the “deed of exchange.”

Ruling: No, the "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be
considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The
Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands.
Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract.
 20. Onapal Phils vs CA, 218 SCRA 281 (1993)

Facts: Private respondent was invited by defendant's Account Executive Elizabeth Diaz to invest in the commodity
futures trading by depositing the amount of P500,000.00 (Exh. "A"); She was then made to sign the Trading Contract and
other documents without making her aware/understand the risks involved; On June 2, 1983, plaintiff was informed by
Miss Diaz that she had to deposit an additional amount of P300,000.00 "to pay the difference" in prices, otherwise she
will lose her original deposit of P500,000.00; Plaintiff further testified that she understood the transaction of buying and
selling as speculating in prices, and her paying the difference between gains and losses without actual delivery of the
goods to be gambling, and she would like to withdraw from this kind of business, the risk of which she was not made
aware of.

Issue: whether or not the contract for the sale of products for future delivery between petitioner and respondent is
valid?

Ruling: By delivery is meant the act by which the res or subject is placed in the actual or constructive possession or
control of another. It may be actual as when physical possession is given to the vendee or his representative; or
constructive which takes place without actual transfer of goods, but includes symbolic delivery or substituted delivery as
when the evidence of title to the goods, the key to the warehouse or bill of lading/warehouse receipt is delivered. 12 As
a contract in printed form, prepared by petitioner and served on private respondent, for the latter's signature, the
trading contract bears all the indicia of a valid trading contract because it complies with the Rules and Regulations on
Commodity Futures Trading as prescribed by the SEC. But when the transaction which was carried out to implement the
written contract deviates from the true import of the agreement as when no such delivery, actual or constructive, of the
commodity or goods is made, and final settlement is made by payment and receipt of only the difference in prices at the
time of delivery from that prevailing at the time the sale is made, the dealings in futures become mere speculative
contracts in which the parties merely gamble on the rise or fall in prices. A contract for the sale or purchase of
goods/commodity to be delivered at future time, if entered into without the intention of having any goods/commodity
pass from one party to another, but with an understanding that at the appointed time, the purchaser is merely to
receive or pay the difference between the contract and the market prices, is a transaction which the law will not
sanction, for being illegal.
Illustrative cases

21. Filoil Marketing vs. IAC 169 SCRA (1989)

Facts: This case arose from a sale of a piece of land belonging to Josefina Alberto de Pabalan in favor of Villa Rey Transit
on December 22, 1971. The purchase price was P140,000.00, payable in installments. On the day of the sale, TCT No.
87322 covering the land was delivered by Pabalan to Jose M. Villarama, President of Villa Rey Transit, who on February
25, 1972, caused its cancellation and the issuance of TCT No. 94229 in his own name. The new certificate of title was
clean; no conditions were annotated thereon; and the transfer appeared to have been made by virtue of an absolute
deed of sale.

On that very same date, Villarama mortgaged the land on behalf of Villa Rey Transit to the herein petitioner as security
for a loan of P350,000. 00. Filoil Marketing Corporation was at the time already occupying the land by virtue of a
contract of lease earlier entered into with Pabalan. In the deed of mortgage, Villarama warranted that this was the only
encumbrance on the land, which was otherwise free from all liens and encumbrances. On January 25, 1974, the
mortgagor having defaulted in the payment of the debt, the mortgage was extrajudicially foreclosed and the land was
sold at public auction.

Filoil was the highest bidder. The certificate of sale was duly annotated on the certificate of title. However, before the
petitioner could consolidate its ownership over the property, Pabalan, having learned of these developments, filed a
complaint in the Court of First Instance of Pangasinan, principally against Villa Rey Transit, Villarama and Filoil.

Issue: Whether the original contract between Pabalan and Villa Rey Transit was a conract of sale or merely a contract to
sell.

Ruling: It is obvious that the above instrument is not a contract to sell as contended by the private respondent. We read
it as a deed of sale in which title to the subject land was transferred to the vendee as of the date of the transaction
notwithstanding that the purchase price had not yet been fully paid at that time.

In the first place, the dispositive part of the deed states that "for and in consideration of the sum of ONE HUNDRED
FORTY THOUSAND (Pl40,000.00) PESOS, payable under the terms and conditions stated in the foregoing premises, the
VENDOR sells, transfers and conveys unto the VENDEE ... the property in question as of December 22, 1971, the date of
the said document.

Secondly, and more importantly, it is provided in paragraph 5 thereof that "should the VENDEE, prior to full payment of
all the amounts aforementioned, decide to sell or to assign part or all of the aforementioned parcel of land, the VENDOR
shall be informed in writing and shall have the option to repurchase the property ... Should the VENDOR herein decide to
repurchase and the property is sold or transferred to a third person, the balance of the consideration herein still due to
the VENDOR shall

constitute automatically a prior lien on the consideration to be paid by the third person to herein VENDEE.”

Under the first-cited stipulation, what is deferred is not the transfer of ownership but the full payment of the purchase
price, which is to be made in installments, on the dates indicated. Under the second stipulation, it is recognized that the
vendee may sell the property even "prior to full payment of all the amounts aforementioned," which simply means that
although the purchase price had not yet been completely paid, the vendee had already become the owner of the land.
As such, he could sell the same, subject to the right of repurchase reserved to the vendor. In fact, the contract also
provides for the possibility of the vendee selling the property to a third person, in which case the vendor, if she wishes
to repurchase the land, shall have a lien on any balance of the consideration to be paid by the third person to the
vendee.
 22. Visayan Sawmill vs CA 219 SCRA 381 (1993)

Facts: Plaintiff-appellee and defendants-appellants entered into a sale involving scrap iron located at the stockyard of
defendant-appellant corporation at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition that plaintiff-
appellee will open a letter of credit in the amount of P250, 000.00 in favor of defendant-appellant corporation on or
before May 15, 1983. This is evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both
parties. However, the condition was not met. That defendant-appellant corporation is unwilling to continue with the
sale due to plaintiff-appellee's failure to comply with essential pre-conditions of the contract.

In his complaint, private respondent prayed for judgment ordering the petitioner corporation to comply with the
contract by delivering to him the scrap iron subject thereof; he further sought an award of actual, moral and exemplary
damages, attorney's fees and the costs of the suit.

Held: This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the
sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private
respondent in control and possession thereof. In the first place, said Article 1497 falls under the Chapter 15 Obligations
of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed
therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the
private respondent's failure to comply with the positive suspensive condition earlier discussed, such an obligation had
not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the
event that the sale would materialize. The private respondent was not thereby placed in possession of and control over
the scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell into a contract of
sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the
premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and
eventually cancelled the contract.

The obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific
performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary,
pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind, as it did in this case, the
contract. Said Article provides: "ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed
a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer.
Art. 1461

23. Sibal vs. Valdez 50 Phil 522 (1927)

FACTS: The deputy sheriff of Tarlac levied an attachment on 8 parcels of land belonging to Leon Sibal which Macondray
& Co., Inc., bought at the public auction. Later, Sibal’s personal property which included the sugar cane (planted by the
plaintiff and his tenants) now in question and his real properties were also attached and were sold at public auction to
Emilio J. Valdez. On the same day, Macondray & Co. sold and conveyed to Valdez all of its rights and interest in the 8
parcels of land acquired by it at first public auction. Within one year from the date of the attachment and sale, plaintiff
offered to redeem said sugar cane and tendered to Valdez the amount sufficient to cover the price, interest and any
assessments or taxes which Valdez may have paid thereon after the purchase. Valdez refused to accept the money and
to return the sugar cane to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the Valdez; that a judgment be rendered ordering
him to consent to the redemption of the sugar cane in question; and, to pay to the plaintiff the value of palay harvested
by defendant with interest and costs.

ISSUE: Whether or not a thing having potential existence may be a subject of a valid sale?

RULING: Yes. (Mr. Mechem says that) A valid sale may be made of a thing, which though not yet actually in existence, is
reasonably certain to come into existence as the natural increment or usual incident of something already in existence,
and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence.
Things of this nature are said to have a potential existence. The thing sold, however, must be specific and identified.
They must be also owned at the time by the vendor.
 24. Phil. Refining Co. vs Palomar 148 SCRA 313 (1987)

FACTS: This is an appeal from the decision of the Court of First Instance of Manila in Civil Case No. 72498, entitled
"Philippine Refining Company v. Hon. Enrico Palomar," finding that plaintiff-appellee's promotion schemes ("Breeze Easy
Money" and "CAMIA Lucky-Key Hunt") were not in the nature of a lottery and enjoining appellant from issuing a "fraud
order" on the aforementioned schemes of appellee. It appears that the Philippine Refining Company, herein appellee,
resorted to two schemes to promote the sale of its products: Breeze Easy Money and CAMIA Lucky-Key Hunt, both of
which envisioned the giving away for free of certain prizes (without additional consideration) for the purchase of Breeze
soap and CAMIA cooking oil. In other words, the participants would get the exact value of the price for the goods plus
the chance of winning in the scheme. No one would be required to pay more than the usual price of the products.

ISSUE: Is there a sale of vain hope or expectancy or represented in the form of lotteries, under Art.1461 of the civil
code?

RULING: No. The Court has consistently ruled that a plan whereby prizes can be obtained without any additional
consideration (when a product is purchased) is not a lottery (Uy v. Palomar L-23248, February 28, 1969; U.S. v. Baguio,
39 Phil. 862; Caltex (Phil.) Inc. v. Postmaster-General, 18 SCRA 247). It is thus clear that the schemes in the case at bar
are not lotteries. The allegation that the prohibition by the Postmaster General should have first been appealed to the
Department Secretary concerned in view of the doctrine denominated as "the exhaustion of administrative remedies"
has no application here because one recognized exception to the doctrine is when the issue raised is purely a legal one.
In view of the foregoing, the Court RESOLVED to DISMISS this appeal and to AFFIRM the assailed decision of the Court of
First Instance.
25. Gaite vs. Fonacier 2 SCRA 830—Abordo
Agency vis-à-vis Sales

26. Quiroga vs Parson Hardware 38 Phil 50 (1918)

Facts: The defendant was granted by the plaintiff of the exclusive to sell, as an “agent,” Quiroga’s beds in the Visayas at
the invoice price in Manila. The agreement was for the defendant to pay for the beds at a discount from 20% to 25% as
commission on the sales. The defendant shall pay the plaintiff whether the beds are sold or not. The plaintiff claims that
the defendant is his “agent” while defendant says he was merely a purchaser.

Issue: Is the contract between the parties that of agency or sale?

Ruling: Contract of sale. Plaintiff was under obligation to supply the bed and the defendant was under obligation to pay
the price regardless of whether or not he sold the beds. If it were an agency, the agent receives the thing for the
purpose of selling it and does not pay the price. He merely delivers the price he realized from the sale of the thing to a
third person. He returns the thing if he failed to sell it. The fact that “discount” or so-called commission has been given is
immaterial.
 27. G. Puyat vs Arco Amusement, 72 Phil 402

Facts: Arco Amusement was engaged in the business of operating cinematographs. Gonzalo Puyat & Sons Inc. (GPS) was
the exclusive agent in the Philippines for the Star Piano Company. Desiring to equip its cinematograph with sound
reproducing devices, Arco approached GPS, through its president, Gill Puyat, and an employee named Santos. It was
agreed between the parties that GPS would order sound reproducing equipment from Star Piano Company and that
Arco would pay GPS, in addition to the price of the equipment, a 10% commission, plus all expenses such as freight,
insurance, etc. Three years later, Arco discovered that the prices quoted to them by GPS with regard to their first 2
orders mentioned were not the net prices, but rather the list price and that it had obtained a discount from Star Piano.
Moreover, Arco alleged that the equipment were overpriced. Thus, being its agent, GPS had to reimburse the excess
amount it received from Arco.

Issue: Whether or not there was a contract of agency, not of sale?

Ruling: It was not a contract of agency but rather of sale. The letters containing Arco’s acceptance of the prices for the
equipment are clear in their terms and admit no other interpretation that the prices are fixed and determinate. While
the letters state that GPS was to receive a 10% commission, this does not necessarily mean that it was an agent of Arco,
as this provision is only an additional price which it bound itself to pay, and which stipulation is not incompatible with
the contract of sale. It is GPS that is the exclusive agent of Star Piano on the Philippines, not the agent of Arco. The facts
and circumstances show that Arco entered into a contract of sale with GPS, the exclusive agent of Star Piano. As such, it
is not duty bound to reveal the private arrangement it had with Star Piano relative to the 25% discount. Thus, GP is not
bound to reimburse Arco for any difference between the cost price and the sales price, which represents the profit
realized by GPS out of the transaction.
 28. Schmid et al vs. Martinez Fishing, 166 SCRA 493

FACTS: Respondent Martinez Fishing needed electrical generators for the operation of its business. Petitioner Schmid
advertise and sells electrical generators branded “Nagata”. The same is supplied by the manufacturer, the D. Nagata Co.
Ltd., of Japan. Respondent purchased 12 brand new generators and D. Nagata Co., Ltd. shipped them to respondent
through an irrevocable line of credit. However, the 12 generators were found to be defective. Consequently, respondent
informed petitioner of its intention to return all the generators, which in fact, 3 of which were actually returned.
Respondent sued petitioner on the warranty, asked for rescission of the contract; that the petitioner be ordered to
accept the generators and be ordered to pay back the purchase money; and damages.

Note that D. Nagata Co., Ltd directly shipped from their offices in Japan to respondent with the latter executing a letter
of credit in favour of Nagata Co. Petitioner served as an intermediary between the two and received a commission for its
services.

ISSUE: Whether or not the transaction between Schmid and Martinez Fishing was a sale transaction or an indent
transaction?

RULING: The transaction is an indent transaction.

A sale is a transfer that puts the transferee in the attitude or position of an owner and makes him liable to the transferor
as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale (Based on
Art. 458 of the NCC). However, an indentor of an indent transaction is a middleman in the same class as commercial
brokers and commission merchants. The chief feature of a commercial broker and a commercial merchant is that in
effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to
the transaction.

Based on the facts presented, it was deemed that Schmid only rendered its services as a middleman between Nagata Co.
and respondent, from the time of purchase until the same was repaired by Nagata Co.’s technicians. Not being a vendor
of the 12 generators, petitioner cannot be held liable for the implied warranty for hidden defects under the Civil Code.
Sales vis-à-vis Piece Work

29. Inchausti vs Cromwell, 20 Phil 345

Facts: Inchausti is engaged in the business of buying and selling at wholesale hemp, both for its own account and on
commission. It is customary to sell hemp in bales which are made by compressing the loose fiber by means of presses,
covering two sides of the bale with matting, and fastening it by means of strips of rattan; that the operation of bailing
hemp is designated among merchants by the word “prensaje.” In all sales of hemp by Inchausti, the price is quoted to
the buyer at so much per picul, no mention being made of bailing. It is with the tacit understanding that the hemp will
be delivered in bales. The amount depends under the denomination of “prensaje” or the baled hemp. CIR made demand
in writing upon Inchausti for the payment of the sum of P1,370.68 as a tax of one third of one per cent on the sums of
money mentioned as aggregate sum collected as prensaje or the baled hemp. Inchausti paid upon protest, contending
that the collected amount is illegal upon the ground that the said charge does not constitute a part of the selling price of
the hemp, but is a charge made for the service of baling the hemp.

Issue: WON the baled hemp constitutes a contract of sale or a contract for a piece of work?

Ruling: Contract of sale. The distinction between a contract of sale and one for work, labor, and materials is tested by
the inquiry whether the thing transferred is one no in existence and which never would have existed but for the order of
the party desiring to acquire it, or a thing which would have existed and been the subject of sale to some other person,
even if the order had not been given.

It is clear that in the case at bar, the hemp was in existence in baled form before the agreements of sale were made, or,
at least, would have been in existence even if none of the individual sales here in question had been consummated. It
would have been baled, nevertheless, for sale to someone else, since, according to the agreed statement of facts, it is
customary to sell hemp in bales. When a person stipulates for the future sale of articles which he is habitually making,
and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor. It is
otherwise when the article is made pursuant to agreement. If the article ordered by the purchaser is exactly such as the
plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at the defendant’s
request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendant’s order
for it.

Baling was performed for the general market and was not something done by plaintiff which was a result of any peculiar
wording of the particular contract between him and his vendee. One who exposes goods for sale in the market must
have them in marketable form. The hemp in question would not have been in that condition if it had not been baled.
The baling, therefore, was nothing peculiar to the contract between the plaintiff and his vendee. It was precisely the
same contract that was made by every other seller of hemp. It resulted simply in the transfer of title to goods already
prepared for the general market.

(MAY BE OMITTED)

Baling is performed before the sale. The purchaser of hemp owes to the seller nothing whatever by reason of their
contract except the value of the hemp delivered. That value, that sum which the purchaser pays to the vendee, is the
true selling price of the hemp, and every item which enters into such price is a part of such selling price. By force of the
custom prevailing among hemp dealers in the Philippine Islands, a purchaser of hemp in the market, unless he expressly
stipulates that it shall be delivered to him in loose form, obligates himself to purchase and pay for baled hemp.
It is undoubted that the vendees, in the sales referred to in the case at bar, would have no right, after having made their
contracts, to insists on the delivery of loose hemp with the purpose in view themselves to perform the baling and thus
save 75 centavos per bale. It is unquestioned that the seller, the plaintiff, would have stood upon his original contract of
sale, that is, the obligation to deliver baled hemp, and would have forced his vendees to accept baled hemp, he himself
retaining among his own profits those which accrued from the proceed of baling.

Thus, the contract being that of a sale, Inchausti is chargeable for the amount of tax based on the baled hemp and not
on the raw hemp sold alone.
 30. Engineering and Machinery Corp. vs CA, 252 SCRA 156

Facts: Almeda (respondent) and Engineering (Petitioner) signed a contract, wherein Petitioner undertook to fabricate,
furnish and install the air-conditioning system in the former’s building in Makati. Petitioner was to furnish the materials,
labor, tools and all services required in order to so fabricate and install said system.

Respondent sold the building to NIDC but eventually took it back for non-compliance with the terms and conditions of
the contract of sale. Respondent learned from the employees of NIDC of the defects of the air-conditioning system of
the building. Thereafter, respondent sued Petitioner for breach of contract. In his reply, Petitioner asserts that the
contract was of sale and the claim is barred by prescription since the responsibility of a vendor for any hidden faults or
defects in the thing sold runs only for 6 months. Respondent contends that since it was a contract for a piece of work,
hence the prescription period was ten years.

Issue: 1) WON the contract for the fabrication and installation of a central air-conditioning system in a building, one of
“sale” or “for a piece of work”? 2) WON the claim for refund was extinguished by prescription?

Held: 1) A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as
to whether the thing transferred is one not in existence and which would never have existed but for the order, of the
person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject
of the contract would have existed and been the subject of a sale to some other person even if the order had not been
given, then the contract is one of sale.

A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale,
but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work .

The contract in question is one for a piece of work. It is not petitioner’s line of business to manufacture air-conditioning
systems to be sold “off-the-shelf.” Its business and particular field of expertise is the fabrication and installation of such
systems as ordered by customers and in accordance with the particular plans and specifications provided by the
customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the
particular plans and specifications agreed upon with the customers.

2) The original complaint is one for damages arising from breach of a written contract – and not a suit to enforce
warranties against hidden defects – we here – with declare that the governing law is Article 1715 (supra). However,
inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is
Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions “upon a written contract” prescribe
in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May
8, 1971, it is clear that the action has not prescribed.